It's How They Close It

As we saw last Thursday, even the strongest of closes can still be deceiving. Nonetheless, playing the odds it is typical for a corrective market to open impressively with a gap up, such as what we are seeing this morning, only to disappoint newly-minted bottom-fishing longs with a sudden reversal in the afternoon to finish poorly. 

Thus, if this market is to continue to build on the Brexit weakness and volatility, one would surmise that a letdown awaits longs this afternoon. Adding complexity to the issue, however, is the long, patriotic holiday weekend ahead, which often compels shorts to back off the gas pedal. Further, we know the last several years have been dominated by stunning "V-shaped" rallies off the sloppiest of charts, erasing bears' hopes for prolonged pullbacks. 

Adding up all of these factors leads us to consider to the notion of simply tightening up timeframes and adding extra care to overnight holdings, as we have seen with the violent gaps in the futures markets since Thursday evening. 

The S&P 500 Index is currently negotiating its 200-day moving average from the underside, after breaching the 2020 level on the cash index yesterday. Issues like recent-IPO TWLO are notably outperforming, as are TWTR and YELP again, but trusting swing longs remains a tough proposition if we see a poor afternoon portion of the session today. 

So in spite of the strong cash close, then limit down futures last Thursday/Friday, a strong close today would likely offer bulls some breathing room into the Fourth.